Luther is a successful logistical services firm. It is an all-equity firm that currently has $2 billion in cash. Luther has decided to issue new debt of $3b. With the $3bn raised from its debt plus the $2bn in cash, Luther will repurchase shares from its investors, and has already announced the stock repurchase plan. Currently Luther is an all equity firm with 1.25 billion shares outstanding. Luther's shares are currently trading at $20 per share. Assume that capital markets are perfect.

1.) The market capitalization of Luther before this transaction takes place is: A) $20 billion B) $19 billion C) $25 billion D) $24 billion

2. After the repurchase how many shares will Luther have outstanding? A) 0.75 billion B) 1.0 billion C) 1.1 billion D) 1.2 billion

3. With perfect capital markets, what is the market value of Luther's equity after the share repurchase? A) $15 billion B) $10 billion C) $25 billion D) $20 billion

4. With perfect capital markets, what is the market price per share of Luther's stock after the share repurchase? A) $25 B) $24 C) $15 D) $20

5. Suppose you are a shareholder in Luther holding 200 shares, and you disagree with the decision to lever the firm. You can undo the effect of this decision by A) borrowing $800 and buying 40 shares of stock. B) selling 30 shares of stock and lending $600 C) borrowing $1200 and buying 60 shares of stock. D) selling 60 shares of stock and lending $1200.